Wall Street Analyzes the Impact of the U.S. AI Data Center Optics Ban

ME AI news that the U.S. is considering restricting imports of optical components from China for AI data centers has become a new trading theme for the optical module sector. Overnight, U.S. equities reacted first. Stimulated by the news, stocks such as Marvell, Coherent, Lumentum, Applied Optoelectronics, and Corning surged collectively, with capital rapidly flowing into the U.S.-based optical communications supply chain. Meanwhile, A-share optical module stocks faced downward pressure today, with companies like InnoLight, Eoptolink, and Fortune Optoelectronics—linked to the North American AI supply chain—coming under market scrutiny. Wall Street’s latest views are beginning to diverge. Both Morgan Stanley and Citigroup released quick analyses on August 4, but their focus differed significantly. Morgan Stanley emphasized the positive impact on the U.S. optical communications supply chain. It argued that if the U.S. ultimately restricts Chinese optical transceivers from entering AI data center supply chains, non-Chinese suppliers stand to gain market share, with Coherent being the clearest beneficiary. AAOI and Fabrinet are also expected to capture part of the incremental demand. Lumentum’s upside is more indirect, primarily stemming from a potential extension of the EML laser supply shortage cycle; market concerns about easing supply and margin pressure may be delayed. However, Morgan Stanley also acknowledged that implementing such a ban would be highly challenging. Current non-Chinese suppliers lack sufficient capacity to meet AI capital expenditure demands, and key upstream materials such as InP substrates still involve Chinese supply chains. If the U.S. restricts Chinese optical modules, China could retaliate by targeting critical material inputs. Morgan Stanley even suggested a potential workaround: Chinese cloud providers increasing purchases of U.S.-made optical communication components. Citigroup’s assessment was more cautious. It argued that this potential ban would be difficult to enforce as a simple, clear rule. Seven of the world’s top ten optical transceiver companies are Chinese, supplying over 50% of high-speed optical modules to major U.S. cloud vendors; meanwhile, the AI optical module supply chain remains tight, with Chinese manufacturers holding advantages in cost, product iteration, and delivery capability. Citigroup expects that under current supply-demand constraints, policy exemptions are likely to be introduced. For Chinese companies, Citigroup ranked the impact as follows: Fortune Optoelectronics is least directly affected, Dongshan Precision moderately so, and Eoptolink most directly due to its business profile. Fortune Optoelectronics primarily supplies passive components to overseas optical module firms, with limited short-term exposure; Eoptolink benefits from approximately 88% of its 2025 revenue coming from Thailand, providing overseas production buffer. The real concern is whether U.S. policy will expand to cover Chinese-backed companies’ production facilities in third countries. This explains the market’s divergence: U.S. stocks are pricing in order migration expectations, while A-shares are reacting to compliance risks and valuation discounts tied to North American customers. From both reports, Wall Street’s current consensus is clear: if implemented, the ban would briefly benefit valuation re-rating for the U.S. optical communications chain. The divergence lies in whether order migration can occur smoothly. AI data center construction continues to accelerate, and cloud providers require stable, low-cost, high-speed supply chains. Policy can shift expectations—but capacity, certification, and yield (source: BlockBeats)